CENTRAL JAPAN RAILWAY COMPANY Annual Report 2007

Notes to Non-Consolidated Financial Statements
1. INCORPORATION OF CENTRAL JAPAN RAILWAY COMPANY
Central Japan Railway Company (Tokai Ryokaku Tetsudo Kabushiki Gaisha, the "Company") was incorporated on April 1, 1987, as a private business company,
pursuant to the Law for Japanese National Railways Restructuring enacted upon the resolution of the Japanese Diet.
The business of the Japanese National Railways ("JNR") was succeeded to by the following newly established organizations: seven railway companies
including the Company, the former Shinkansen Holding Corporation (a predecessor entity to the Railway Development Fund (1997–1991), which was
subsequently succeeded by the Corporation for Advanced Transport and Technology (the"CATT") (2003–1997) and in turn by the Japan Railway Construction,
Transport and Technology Agency(the"JRTT")), former Railway Telecommunication Co., Ltd., Railway Information Systems Co., Ltd. and the Railway
Technical Research Institute. JNR itself became JNR Settlement Corporation (the "JNRSC"). All of the assets and liabilities of JNR were transferred to such
organizations, including JNRSC.
Prior to December 1, 2001, the Law Concerning Passenger Railway Companies and Japan Freight Railway Company (the "Law") required that authorization
be obtained from the Minister of Land, Infrastructure and Transport (the "Minister of Transport") regarding fundamentals such as: (1) commencement of
business other than railway and its related business, (2) the appointment or dismissal of representative directors and corporate auditors, (3) the issuance of new
shares and bonds, (4) long-term borrowings, (5) amendments to the Articles of Incorporation, (6) operating plans, (7) sales of material assets, (8) appropriations
of earnings and (9) merger or dissolution.
As of December 1, 2001, since the Law was revised and the Company was no longer in scope of the Law, the Company was not required to obtain the
aforementioned authorizations.
On October 8, 1997, the Company's shares were listed on the Nagoya, Tokyo and Osaka stock exchanges in Japan. JNRSC, which held all 2,240,000 of the
Company's outstanding shares prior to the listing, sold 1,353,929 shares in the initial public offerings.
Pursuant to the Law for Disposal of Debts and Liabilities of JNRSC enacted in October of 1998, the Company's shares held by JNRSC were transferred to
Japan Railway Construction Public Corporation (the"JRCPC").
On October 1, 2003, the CATT and the JRCPC were fully integrated, pursuant to the Law of Japan Railway Construction, Transport and Technology enacted on
October 1, 2003, and designated as JRTT.
In July 2005, the JRTT sold 600,000 shares of the Company.
On April 5, 2006, the JRTT also sold its remaining 286,071 shares of the Company. As a result of this sale, all of the Company’s shares held by the JRTT were
sold.
2. BASIS OF PRESENTING FINANCIAL STATEMENTS
The accompanying non-consolidated financial statements have been prepared from the accounts maintained by the Company in accordance with the provisions
set forth in the Corporate Law of Japan, the Japanese Securities and Exchange Law, the Law for Railway Business Enterprise and related accounting
regulations, and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
On December 27, 2005, the Accounting Standards Board of Japan (the “ASBJ”) published a new accounting standard for the statement of changes in equity,
which is effective for fiscal years ending on or after May 1, 2006. The statement of shareholders’ equity, which was previously voluntarily prepared in line
with the international accounting practices, is now required under generally accepted accounting principles in Japan and has been renamed “the statement of
changes in equity” in the current fiscal year.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial statements of the Company, non-consolidated
statements of cash flows and certain disclosures are not presented herein in accordance with accounting principles generally accepted in Japan.
In preparing these non-consolidated financial statements, certain reclassifications and rearrangements have been made to the Company's financial statements
issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in
the 2006 non-consolidated balance sheet and in the 2006 and 2005 non-consolidated statements of income to conform to the classifications used in 2007.
The non-consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate
of ¥118 to $1, the approximate rate of exchange at March 30, 2007. Such translations should not be construed as representations that the Japanese yen
amounts could be converted into U.S. dollars at that or any other rate. Japanese yen figures less than million yen are rounded down to the nearest million yen,
except for per share information and U.S. dollar figures less than thousand of U.S. dollar are also rounded down to the nearest thousand of U.S. dollar, except
for per share information.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Non-consolidation
The non-consolidated financial statements do not include the accounts of subsidiaries. Investment in subsidiaries and associated companies are stated at cost.
b. Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificate of deposits and commercial paper that represent short-term investments, all of which mature or become
due within three months of the date of acquisition.
c. Materials and Supplies
Materials and supplies are carried at cost determined by the moving-average cost method.
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